In what boiled down to an dispute over ownership of the mark, the Board granted a petition for cancellation of Respondent Michael Lajtay’s registration for the mark HOLE IN ONE for sports drinks, ruling that the registration was void ab initio because, at the time of filing the underlying application, Lajtay did not intend to use the mark by himself, but rather intended to use it jointly with Darryl Cazares to form a company and market beverages. Hole In 1 Drinks, Inc. v. Michael Lajtay, Cancellation No. 92065860 (February 19, 2020) [precedential] (Opinion by Judge Marc A. Bergsman).

Lajtay represented himself from the early stages of the proceeding, and the Board pointed out that “strict compliance” with the applicable rules “is required of all parties, whether or not they are represented by counsel.”  McDermott v. S.F. Women’s Motorcycle Contingent, 81 USPQ2d 1212, n.2 (TTAB 2006), aff’d unpub’d, 240 Fed. Appx. 865 (Fed. Cir. 2007). Lajtay’s brief failed to comply with the Board’s formatting requirements, but since it was only seven pages long, the Board chose to consider it. However, it refused to consider the evidence attached to the brief, as untimely.

Lajtay filed his application to register the HOLE IN ONE mark on January 24, 2015, based on an alleged bona fide intent to use the mark in commerce. A business plan and various correspondence indicated that he and Darryl Cazares were business partners who were seeking funding to develop and market the HOLE IN ONE beverages. Cazares filed “articles of organization” for a California company called “Hole-In-One Drinks, LLC,” naming Lajtay and himself as co-managers. Lajtay conceded that Cazares was a “co-founder, a business partner, in the Hole-In-One endeavor.” In April 2015, Lajtay began selling the beverages, naming named Hole-in-One Drinks, LC as the vendor and producer.

In sum, Respondent filed the intent-to-use application in his own name, even though Respondent and Darryl Cazares were negotiating or had already agreed to form Hole-In-One Drinks, LLC, the entity through which they intended to sell HOLE IN ONE branded beverages.

Non-ownership: Petitioner asserted that the subject registration was void because Respondent Lajtay did not “own” the mark at the time of filing. However, because the application was filed under Section 1(b), the Lajtay did not have to be the “owner” of the mark sought to be registered.

Section 1(b) concerns intent-to-use applications. Because in such an application the mark has not yet been used [or the applicant is not claiming use of the mark], and because ownership of a mark arises through use of the mark, Section 1(b) does not refer to “the owner of a trademark,” as does Section 1(a) of the Trademark Act which deals with use based applications.

As the Board recently held in Norris v. PAVE: Promoting Awareness, Victim Empowerment, 2019 USPQ2d 370880 *4 (TTAB 2019), a claim that an applicant was not the rightful “owner” of the mark at the time of filing “is not available when the application, as originally filed, is not based on use of the mark in commerce.”

The Board observed, however, that “Petitioner could have asserted that Respondent did not have a right to file his intent-to-use application based on a lack of a bona fide intent to use the mark in commerce as of the filing date of the intent-to-use application.”

Trial by Implied Consent: Rule 15(b) of the Federal Rules of Civil Procedure provides that when an issue not pleaded is tried by consent of the parties, express or implied, the issue will be treated as if it had been raised in the pleadings. Here, Lajtay did not expressly consent to trial of the issue of bona fide intent. Implied consent may be found only when the non-offering party “(1) raised no objection to the introduction of evidence on the issue, and (2) was fairly apprised that the evidence was being offered in support of the issue.” TBMP Section 507.03(b).

As noted, petitioner alleged that Lajtay was not the rightful owner of the HOLE IN ONE mark at the the he filed the application to register. To the Board “[i]t appears that Petitioner intended to allege that Respondent did not have a right to file the application due to lack of a bona fide intent to use the HOLE IN ONE mark by himself and that Respondent and Darryl Cazares had a bona fide intent to use the HOLE IN ONE mark as joint applicants until they formed Hole-In-One Drinks, LLC.”

Petitioner, according to the Board, failed to appreciate the distinction between a use-based application and an intent-to-use application, and thus petitioner mistakenly referred to Lajtay’s lack of “ownership” of the mark.

This mistake is somewhat understandable, however, because, as noted above, it was not until 2019―i.e., about two years after the petition in this proceeding was filed―that the Board held for the first time that a claim that an applicant is not the rightful “owner” of the applied-for mark is not available when the application is not based on use of the mark in commerce. Norris v. PAVE, 2019 USPQ2d at *4.

The Board observed that “had Petitioner properly pleaded its claim, the litigation would have proceeded unchanged.”

Instead of having to prove whether the owner of the mark was Respondent or Respondent and Darryl Cazares, Petitioner had to prove whether Respondent or Respondent and Darryl Cazares collectively had the bona fide intent to use the HOLE IN ONE mark. Thus, Respondent was fairly apprised that the evidence submitted in this case supported the issue of whether Respondent had the right to file the application based on his sole bona fide intent to use the mark as of the filing date of the underlying intent-to-use application, and there was no reason for Respondent to object to any testimony or evidence because it was the same testimony and evidence for either the nonownership claim or a lack of a bona fide intent-to-use claim.

Lajtay introduced testimony regarding whether Darryl Cazares had an interest or a bona fide intent to use the mark as of the filing date. Thus, Lajtay “was aware that the current dispute centers on which person(s) or entity could properly be said to have had a bona fide intent to use the mark at the time of filing.” (emphasis by the Board). And so the Board concluded that the lack-of-bona-fide-intent claim was tried by implied consent because Lajtay had fair notice of the issue and actively defended against it. And so the Board deemed that pleadings to be amended under FRCP 15(b).

Lack of Bona Fide Intent: The Board found that Lajtay and Darry Cazares jointly had a bona fide intention to use the mark HOLE IN ONE at the time of Respondent’s filing. And so the application should have been filed in both names as joint applicants. See Conolty v. Conolty O’Connor NYC LLC, 111 USPQ2d 1302, 1309 (TTAB 2014). In fact, the Board noted, Hole-In-One Drinks, LLC was the first and only user of the mark, and thus is the owner of the mark.

Petitioner has established by a preponderance of the evidence that Respondent alone did not have a right to file the underlying intent-to-use application due to lack of a bona fide intent to use the HOLE IN ONE mark as of the filing date of the application that Respondent intended to use the HOLE IN ONE MARK with Darryl Cazares, as joint owners, and that, therefore, the underlying application for the mark was void ab initio. In other words, under these “shared circumstances,” Petitioner and Respondent jointly had the bona fide intent to use the mark in commerce that formed the basis of the application. See Am. Forests v. Sanders, 54 USPQ2d at 1864.

And so the Board granted the petition for cancellation.

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TTABlog comment: Note that when one is filling out a TEAS application, the first box to be filled out is “Owner of Mark.” Perhaps that should say “Applicant”?

Text Copyright John L. Welch 2020.